Taxing online shoppers to pay for the cost of Covid is a false economy

Chancellor Rishi Sunak is reportedly resurrecting the controversial plan, first proposed by his predecessors Philip Hammond and Sajid Javid, to introduce a new tax on online sales. The Chancellor is revisiting the contentious online sales tax plan in an effort to restore the Government’s coffers in the wake of Covid. The National Audit Office says that the total cost of Government spending on Covid-19 measures will be £370bn.

The Chancellor is in a fix. Rishi Sunak needs creative new ways to repair the Government’s finances, and the “Telegraph” reports that the Chancellor has dusted off the plans for an e-commerce tax. These are plans, remember, that both his predecessors toyed with and then hastily put back in the box.

A new 2% tax on e-commerce sales, perhaps coupled with a new delivery tax, could raise up to £2bn for the cash-strapped Chancellor. However, it will be Britain’s growing army of online shoppers who ultimately pay the tax.

Supporters of the scheme claim it will level the playing field for High Street retailers struggling to pay Britain’s exorbitant business rates, which are the highest in Europe. In our view, that’s nonsense. Any High Street retailer with any commercial sense also sells online.

That means the many High Street retailers who have been sensible enough to complement their in-store sales with online ones will now face the double whammy of High Street business rates plus a new tax on their online sales. Beleaguered retailers will be forced to pass the cost on to their customers.

Home shoppers should not be duped into footing the bill for the impact of Covid-19. During lockdown, shoppers of all ages have turned to e-commerce so they could continue to shop safely from their own homes. Cautious consumers must not be punished for remaining wary of crowded shopping centres and stores, especially as Covid-19 cases and hospitalisations are on the rise again.

It is Britain’s sky-high business rates that are the real cause of the long-term collapse of the High Street. A tax on online sales won’t save it. The emergency business rates discount for some retail, leisure and hospitality businesses currently stands at 66%, but that ends next March.

The Treasury should stop dragging its heels and push forward with long-awaited plans to abolish business rates and replace them with a “capital values tax” that would be based on the value of land and the buildings on it. This tax would be paid by the owner of the property rather than the business leasing it.

To find out more about how retailers can develop their combined “brick and click” services to adapt to future changes in retail, see ParcelHero’s new study on the High Street of the future at: https://www.parcelhero.com/research/shop-of-the-future

 

 

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